Annaly Capital Stock Plummets on Interest Rate Hikes and Soaring Bond Yields

Annaly Capital's stock has plummeted this month, reaching its lowest level since March. The company, which manages over $109 billion in assets, has seen a decline of 17.6% from its August highs, pushing its dividend yield to 14.7%. This high-yield investment opportunity has sparked interest among income investors.

The firm's business model is built around mortgage-backed securities and agency collateralized mortgage-backed securities, which are typically guaranteed by government-sponsored entities like Fannie Mae and Freddie Mac. Its Residential Credit Group invests in non-agency residential mortgage assets, while its Mortgage Servicing Rights Group focuses on mortgage servicing rights.

Annaly's recent quarterly results showed a rise in book value per common share to $20.15 from $18.45 last year, driven by an increase in net interest margin to 1.47%. The company reported total income of $247 million and net income available to common stockholders of $781 million for the quarter.

However, Annaly's business is sensitive to interest rate hikes, which can negatively impact its portfolio value. The Federal Reserve's recent decision to raise interest rates and hint at further increases has contributed to the decline in NLY stock. Analysts tracking Annaly have a neutral outlook, with JPMorgan and Wells Fargo slashing their target prices.